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TMI Blog2014 (12) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... ot deal with, the purported reasons recorede3d were served beyond limitation period, hence the notice is bad etc. 2. Addition on account of alleged undisclosed income- Rs. 2,34,64,398/- (original Ground no.4) The ld. Commissioner of Income Tax (Appeals), erred in confirming the order of the Assessing Officer making an addition of Rs. 2,34,64,398/- on account of alleged undisclosed income, without appreciating the fact that the alleged trust was discretionary trust as neither the amount was accrued nor credited to Appellant's name, hence addition cannot be made in the hands of the Appellant. 3. Not adjudicating the alternative ground regarding taxability of income only (Original Ground no.4). Without prejudice to the above, the learned CIT(A) erred on facts and in law in not adjudicating the alternative grounds regarding the taxability of income only of US $ 13,500/- earned by the alleged trust and not the amount outstanding of US $24,06,604.90/- as at 31st December, 2001. 4. Original Ground no.5 The above grounds of appeal are without prejudice to one another and the appellant craves leave to add, alter, amend, delete or modify any of the above grounds of appeal. 2. At the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk account. Our attention was invited to section 106 of the Evidence Act (burden of proving fact) by contending that the department got these authenticated documents which were provided to the assessee also, therefore, reopening is valid. It was pointed out that the assessee was summoned by the Revenue authorities but she/they did not appear before the AO and even sought adjournment during remand proceedings which was granted, convenient date was fixed and even on that date the assessees did not appear. It was submitted that money was arranged by the beneficiaries to the local jurisdiction because distribution of assets was not liable for further taxation at that place (where account of the trust was opened ) but liable for taxation in India. 2.2. We have considered the rival submissions and perused the material available on record. Since identical facts/issues are involved and all the assessees are relatives, therefore, these appeals are being disposed of by this common and consolidated order. In the case of Shri Mohan Manoj Dhupelia the facts in brief are that the assessee filed return of income u/s 139(1) of the Act on 1st August 2002 showing total income of Rs. 1,97,650/-. Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in time. These documents are available at pages from 1 to 15 of the paper book filed by the ld. Special Counsel. We are reproducing hereunder the exhibit list (Hearing) on Taxhaven Bank and US tax Compliance (July 17 and 25, 2008) for ready reference and proper conclusion. United States Senate PERMANENT SUB COMMITTEE ON INVESTIGA TIONS Committee on Homeland Security and Governmental Affairs Carl Levin, Chairman Norm Coleman, Ranking Minority Member EXHIBIT LIST Hearing On TAX HAVEN BANKS AND U. S. TAX COMPLIANCE July 17 and 25, 2008 1. Marsh Foundations, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations. 2. Wu Foundation, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations. 3. Greenfield Foundation, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations. 4. Laity Foundation, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations. 5. a. Statement of former LGT Treuhand employee, formerly known as Henrich Kieber. b. Liechtenstein warrant for the arrest of Henrich Richer. DOCUMENT RELATING TO MARSH ACCOUNTS: 6. Letter of wishes, Lincol Foundation, October 15, 1985. 7. LGT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of JCMA Foundation, indicating statement of assets asper3l December2001 in the total amount of USD 4.283,4 73 .49. dated February 7, 2002. 25. Excerpt from Resolution, The Foundation Board of JCMA Foundation, indicating inventory of assets and liabilities at 31 December 2003 showing a total of USD 2.1 7Z145.9 7, dated March 10, 2004. 26. Excerpt from Resolution of the Foundation Board of JCMA Foundation, showing assets as per 31 December2004 amount to USD 1,202,636.25, dated February 13, 2006. 27. Excerpt from Resolution of the Foundation Board of JCMA Foundation, showing assets as per 31 December2005 amount to USD 1,188,957.64, dated March 30, 2006. 28. Excerpt from Resolution of the Foundation Board of JCMA Foundation, showing assets as per 31 December2006 amount to USD 422,249.10, dated April 18,2007. 29. WI report on Veline Foundation after a March 27, 2000, client visit. 30. Statement of asset as per 31.12.2000, Veline Foundation, dated February 5, 2001. 31. Bearer Share Certificate, Manta Company Limited, dated September 3,1997. 32. Handwritten organizational chart showing Veline Foundation ownership of corporations and property, undated DOCUMENTS RELATED TO LOWY A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndation, Valuz. 51. Documents regarding Beverly Park Corporation. 52. IRS Information Document Requests (IDR) regarding Beverly Park Corporation. 53. State of Delaware, Division of Corporations, Entity Details for Beverly Park Corp., listing Incorporation Dates of December 17, 1991, and January 3, 1997. DOCUMENTS RELATING TO GREENFIELD ACCOUNTS: 54. LGT Memorandum for the Record, dated March 27, 2001, memorializing a March 23, 2001 meeting regarding Maverick Foundation between LGT and Harvey and Steven David Greenfield. 55. WI Summary of Maverick Foundation as of December 31, 2001, dated January 1, 2002., 56. LGT report on Maverick Foundation, undated. 57. LGT report on TSF Company Limited, undated. 58. LGT report on Chiu Fu (Far East) Limited, undated. 59. LGT Background Information/Profile for Maverick Foundation, dated October 12,2001. 60. LGT Background Information/Profile for TSF Company Ltd., BVI, dated December 20, 2001. DOCUMENTS RELATING TO GONZALEZ ACCOUNTS: 61. Foundation Tragique flow chart, undated. 62. LGT report for Tragunda Foundation, dated December 3,2001. 63. LGT Background Information/Profile for Auto and Moteren [Motors] Corp. dated October 3, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with U.S. authorities. 89. Martin Liechti (Head of UBS Wealth Management Americas) email, January2007, regarding net new money goal and Year of the Pig. 90. Referral Campaign BU Americas, June 2002 (Swiss watch await!). 91. Overview Figures North America, prepared by UBS. 92. Case Studies Cross-Border Workshop NAM. 93. UBS Memorandum, dated November 15, 2007, re: Changes in business model for U.S. private clients. 94. Talking Points for Informing U.S. Private Clients With Securities Holdings About The Realignment Of Our Business Model Plus Q&.A. DOCUMENTS RELATED TO OLENICOFF: 95. Statement of Facts, United States of America vs. Bradley Birkenfelc4 dated 2008. 96. Plea Agreement For Defendant Igor hi Olenicoff, dated 2007. 97. Emails between Birkenfeld/Olenicoff, dated July2001, re: Meeting in California. 98. Correspondence of Igor Olenicoff, dated October2001, re: Guardian Guarantee Co. Ltd. 99. Email between Staggl/Olenicoff, dated January2002, re: Structure. 100. UBS documents related to opening of account for Guardian Guarantee Company, Ltd. 101. Emails related to Liechtenstein trust and a Danish Corporation. 102. Fax from Olenicoff to Birkenfeld, dated Decemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch they have learned in the course of their professional capacity and whose confidentiality Is in the best interest of their client. They shall have the right to such secrecy subject to the applicable rules of procedure in court proceedings and other proceedings before Government authorities." Article 10- Data Confidentiality: 'Whoever processes data or has data processed must keep data from applications entrusted to him or made accessible to him based on his professional activities secret, notwithstanding other legal confidentiality obligations, unless lawful grounds exist for the transmission of the data entrusted or made accessible to him, Processing of Personal Data - § 1173., Art. The AB~ (General CMI Code): "The employer may not process data relating to the employee unless such data concern his or her qualification for the employment or are indispensable for the performance of the employment contract. In addition, the provisions of the Data Protection Act shall apply." Article 8-Transhorder Data Flows: "No personal data may be transferred abroad If the personal privacy of the persons affected could be seriously endangered, in particular where there is a failure to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es located hi banking secrecy jurisdictions and tax havens. ~M have a particular focus on taxpayers who have used the services of the LGT Group and Its trustee entity, LGT Treuhand Aktiengesellschaft in Vaduz. Liechtenstein (LGT.) * LGT Treuhand A.O. operates a fiduciary or trustee service and establishes and administers legal entitles such as anstalts, stiftungs (foundations) and trusts for its clients. - * LGT Bank in Liechtenstein A.G. Is the banking division of the LGT Group. It has responsibility for banking services related to the investment functions of the LGT Group. The services provided by LGT include administration and Investment of offshore assets which appear to be beneficially owned by the client LGT acts on Instructions from a client to establish or create a Liechtenstein entity and subsidiary entitles In other tax haven jurisdictions. In the Australian examples, the parent entity Is usually a foundation or trust. In some instances, LGT appears to have been retained as an agent of the client, and ban established and administered a Liechtenstein entity acting in that capacity. The beneficial owners of the Liechtenstein entity are commonly a natural person and thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l wealth in a LGT structure and who do not need access to these funds to supped their domestic lifestyle. LGT plays an active role in servicing and administering the clients Liechtenstein entity. For example the bawd members of a foundation will be LGT employees. They are responsible for administration of the entity and are the approved signatories. The use of LGT employees as board members or trustees and in-house or 'omnibus' entities as nominee directors of Interposed entities is considered to be another means by which the beneficial owner is distanced from being connected to their Liechtenstein entity. This may facilitate the avoidance or evasion of tax on any offshore Income derived by the Liechtenstein entity by an Australian taxpayer, who is the beneficial owner. LGT also arranges for shell entities Incorporated hi other tax haven jurisdictions (such as BVI or Panama) to be set up as Interposed entitles of the Liechtenstein entity for its clients. The ATO considers that these special purpose vehicles are used to layer the transactions and the flow of funds, and (nay be designed to prevent regulators and tax administrators from deter mining the underlying ownership and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereunder the salient features of the Host Trust reg. Home -The trust Reg. can be structured like a company limited by shares or foundations as an instrument for commercial activities or for the administration of assets. Company overview -The trust reg. qualifying as private asset structure pays an annual tax of CHF 1,200 only Executive Sum Company norms many Liechtenstein -Distribution to the beneficiaries as well as profits earned are not subject to any further tax Trust. Reg. -The Supreme Authority is vested in the settlor and is transferable. Foundation Trust -The beneficial interests may be assigned to persons other than the settler Establishing a Company in Liechtenstein Fees and costs -The administration is taken care by the board of trustees. Conclusion -If commercial activities are perused or the articles make provision for such activities an auditor must be appointed. In this case the annual accounts approved by the auditor must be submitted to the Liechtenstein tax administration. Contact Details -In case of losses or liabilities only the asset of the trust reg. have to be used to cover them Disclaimer -The minimum capital to constitute a trust reg. is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax administration. - The minimum capital to constitute a company limited by shares is CHF 50'000. The organization of an individual establishment may be adopted to its specific needs: like a company limited by shares or a foundation, as an instrument for commercial objectives or for the administration of assets. Establishment - The establishment qualifying as private asset structure pays an annual tax of CHF 1 '200 only. - Distributions to the beneficiaries as well as profits earned are not subject to any further tax. - The supreme authority is vested in the founder (holder of the founder's rights) and is transferable. - The beneficial interests may be assigned to persons other than the holder (s) of the founder's rights - The administration is taken care by the board of directors. - If commercial activities are pursued or the articles make provision for such activities an auditor must be appointed. In this case the annual accounts approved by the auditor must be submitted to the Liechtenstein tax administration. - In case of losses or liabilities only the assets of the establishment have to be used to cover them. - The minimum capital to constitute an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets or rights to the trustee with the obligation to hold and make use of this trust property against third parties in his own name as independent legal owner for the benefit of one or more beneficiaries. - The trust comes into existence with the stipulation of the trust settlement (trust deed) between the settlor and the trustee or by means of a trust letter accepted. - The trustee must keep his personal assets strictly separate from the trust property. - To ensure the observance of the provisions in the trust deed an auditor, a protector, a curator or a collator can be appointed. - The keeping of annual accounts is not obligatory. - Trusts according to foreign law can be formed in Liechtenstein. - The assets held by the trust qualifying as private asset structure are subject to an annual tax of CHF 1 '200 only. - The distributions to the beneficiaries as well as the profits earned are not subject to any further tax. Reasons for establishing Liechtenstein Companies The holding of assets Assets of holding companies can be invested in any kind of property; e. g. bank accounts, publicly traded or not traded shares, participations in other companies, real estate property, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between CHF 500 and 600; - Petty expenses. - While the fees for the director and legal representative are payable in advance and cover the acceptance of the respective position by the person or company retained, further services provided by the local director and his staff are charged by the time spent according to an hourly fee rate. The fee rate normally varies between CHF 100 for administrative work to CHF 500 for management and legal work and depends on the level of sophistication involved, the assets concerned as well as on what the parties have agreed. - All fees are subject to 8 % V A T and are charged against the company/trust and may be deducted from the assets held by the same. Conclusions The Liechtenstein jurisdiction qualifies as an offshore financial centre due to: - A very modest tax regime; - A company law which offers next to the ordinary kind of companies like the company limited by shares (AG) those specifically designed to serve the needs coming along with holding of assets, namely the foundation (Stiftung), the establishment (Anstalt) and the trust reg; -The institute of trusts; -A high standard of secrecy laws. Foreign investors have the opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will allow partner nations like India to seek information about suspect individuals and entities and provide for obtaining banking information about such people. The multilateral convention of the 0 ECD provides for all forms of mutual assistance like exchange on request, spontaneous exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection while protecting taxpayers' rights. It also provides the option to undertake automatic exchange, requiring an agreement between the parties interested in adopting this form of assistance. 2.4. So far as, the contention of the ld. Counsel for the assessee that there is violation of principal of natural justice and reasonable opportunity was not provided to the assessee by the Assessing Officer, are concerned, we are not in agreement with this assertion of the ld. Counsel because the assessee was duly provided with the reasons of reopening of assessment and English translated copy of the documents. 2.4.1 In view of the above, we find no substance in the assertion of the assessee that the reopening of assessment was bad, without following the due process of law or violation of principle of natural jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer was again requested to furnish the evidence of such deposit by the assessee and the person who deposited the amount (pg-36). Vide para-13 of the said letter it was claimed that she had not received any benefit from the said trust (pg-39). Identical plea was raised before the ld. CIT(A) also regarding non-supply of material or opportunity to the assessee which has been dealt with by the ld. CIT(A) as under which is worth quoting (page-15) which reads as under :- "The appellant has wrongly alleged that complete material was neither given nor opportunity to cross examine was given. The Assessing Officer has handed over complete set of documents received by him to the appellant during the course of assessment proceedings. Further, as a part of the remand report, the Assessing Officer had called the appellant and opportunity to cross examine the Assessing Officer himself was available to the appellant, however, the appellant chose not to appear and hence cannot raise the bogey of cross examination here. Further, the right to cross examine is available when the department has already recorded the statement and is being used against the appellant. In the instant case, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust. It was requested that since the investigation is in progress, therefore, at this stage it will hamper the investigation if the document is made public as the same list is containing the names of other beneficiaries also. On going through the bank summary in respect of Ambrunova's trust account in LTG Bank Liechtenstein, we find that there is a credit balance of USD 24,06,605 (equivalent to Rs. 11,60,99,390/-).It is worth mentioning the observation/conclusion made/drawn by Hon'ble Justice Krishna Iyer, (the Hon'ble Apex Court) in the case of Chairman Board of Mining Examination & Ors. Vs Ramjee (1977 AIR 1965) (SC) order dated 3rd February 1977. HELD (1 ) Law is meant to serve the living and does no beat its abstract wings in the jural void. Its functional fulfillment as 'social engineering' depends on its scrutinized response to situation, subject-matter and the complex of realities which require ordered control. A holistic understanding is simple justice to the meaning of all legislations. Fragmentary grasp of rules can, n misfire or even backfire, as in this case. [906 H, 907 A] (2) The judicial key to construction is the composite perception of the daha and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s explanation to the Chairman of the Board. He has thus been heard dad compliance with Regulation 26 in the circumstances is complete. [909G-H, 910A-G] Tereaesai's case [1970] 1 S.C.R 251; Management of DTU[1973] 2 S.C.R. 114: Tandon's case [1974] 4 SCC 374 referred to. Observations: Sensitive occupations demand stern juristic principles to reach at scapegraces, high and low, and not mere long drawn-out commissions whose verdicts often provedilatory 'shelter' for the men in whom Parliament his entrusted plenary management. Any sensitive jurisprudence of colliery management must make it cardinal to pt nish the Board vicariously for any major violations and dreadful disasters, on macro considerations of responsibility to the community. The Board must quit, as a legal pendry, if any dreadful deviation, deficiency, default or negligence anywhere in the mine occurs. This is a good case for new principles of liability, based on wider rules of sociological jurisprudence to tighten up the law of omission and commission at the highest levels. Responsibility and penalty must be the concomitants of highly-paid power vested in the top-brass. Any deviance on the part of these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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